Social Security numbers, email addresses, phone numbers, and student-loan balances—that's the information Len R. Breidert, a former employee of a student-loan consolidation company, was able to mine from a government database of student-loan borrowers between 2005 and 2007.
Mr. Breidert had intended to use the data for marketing purposes, according to a government report, but his plan fell apart in 2007, when federal agents raided the Florida office of his then-employer, Student Funding Services. Two years later, the former financial specialist pleaded guilty to fraud in connection with computers and privacy violations, agreeing to serve one year of probation and pay $385 in restitution.
Student-debt relief companies have recently come under increased scrutiny from government agencies and consumer watchdogs, who say that many of the services offered by the firms can be obtained from the federal government at no cost and with little effort.
In an article published last week, The Chronicle of Higher Education examined how some student-debt relief companies entice borrowers with promises of loan consolidation, debt forgiveness, and lower payments. Simultaneously, these companies play up the complexity of the application process and the need for an expert.
But while the consumer-protection issues surrounding the industry have drawn attention, another area is also starting to receive focus: borrower privacy.
The privacy concerns center around the government database mined by Mr. Breidert, the National Student Loan Data System. The system, known as NSLDS, is a database maintained by the Education Department that houses the personal and financial information of millions of borrowers. While the database is confidential, employees for third-party companies (such as lenders, colleges, and debt-relief companies) can use the system for government-sanctioned purposes. In Mr. Breidert's case, he was given access to the database so he could review the loan histories of clients who were interested in consolidating their federal student loans.
Around the same time that Mr. Breidert's plea agreement was entered, employees at two other student-debt relief companies were also prosecuted for misusing the database.
According to a department report to Congress, a marketing director at University Financial Lending Services assigned the NSLDS user accounts of other employees to company managers whose own accounts had been revoked "because of abuse of the NSLDS system." The company's marketing director, David M. Brabson, pleaded guilty in 2009 to fraud charges and privacy violations. He was sentenced to one year of probation and was ordered to pay approximately $980 in restitution.
Mark M. Bullock, a manager at EDU Debt Solutions in Florida, received a similar penalty—two years' probation and $730 in restitution—after he instructed employees to fraudulently obtain NSLDS accounts.
Read more at The Chronicle of Higher Education: http://chronicle.com/article/Promises-of-Debt-Relief-Meet/148387